Recipient or Partner? India’s Role in Infrastructure Development in the Indo-Pacific

The Indo-Pacific is quickly becoming a hub of infrastructure development as countries with a vested interest in the region begin to outline an economic strategy to advance the “free and open” Indo-Pacific. However, India’s role in infrastructure development – whether it serves as a host for projects or as an implementation partner for projects in other countries in the region – remains unclear. For now, India should mostly play the role of a recipient and address its own infrastructure needs in the near term. As it builds its competencies, India can then start to play a bigger role as a project partner for the wider the region.

India’s Domestic Infrastructure Needs

India’s current infrastructure needs are significant. According to a report by the Asian Development Bank, South Asia at large needs to invest nearly 9 percent of its gross domestic product (GDP) on infrastructure development by 2030 to sustain growth. India’s 2018 Economic Survey noted that India alone will face an investment gap of $526 billion by 2040 as it attempts to meet its infrastructure needs. If India is to achieve an average GDP growth rate of 7.8 percent between the years 2016 and 2030, it would need to invest $5.5 trillion in that period to meet its infrastructure needs.

Currently, however, India invests less than half of the necessary $260 billion. As of 2015, India’s estimated investment in infrastructure was almost 4 percent of its GDP at $118 billion. Indeed, India plans to invest $139 billion between 2018 and 2035 in the Bharatmala Pariyojana, or nationwide road and highway construction project, and $111 billion in the Sagarmala project, or port construction project, over the same period. However, boosting investment above this level remains a challenge for India, given struggles with projects based on public-private partnerships, the rise of stressed assets for Indian banks and private companies, and long-standing problems with land acquisition.

Recognizing the possibilities and opportunities in India, foreign funders have already begun investing in the infrastructure sector. Japan has set the tone, providing large amounts of funding for bigger projects, such as $4.5 billion over 40 years for the Delhi-Mumbai Industrial Corridor Project, and $12.2 billion over 50 years for the Mumbai-Ahmedabad High Speed Rail Corridor. The Abu Dhabi Investment Authority has followed suit, investing $1 billion in India’s National Investment and Infrastructure Fund, which is seeking close to $2.7 billion from outside investors.

India’s Partnership Role in the Region

India has also taken on a growing, albeit limited, role as an investment and implementation partner in infrastructure projects across the Indo-Pacific. India’s most notable projects include the development of Chabahar port in Iran, where its $8 billion investment is aimed at connecting Mumbai, India with Iran, Afghanistan, and Central Asia as part of the International North-South Transport Corridor. India also plays a leading role in various infrastructure projects in Afghanistan, such as the development of the Afghan-India Friendship Dam, the construction of the new Afghan Parliament building, and the planned Shahtoot dam project for Kabul.

However, outside of these projects, India’s role in infrastructure development in the region continues to be limited. In fairness, India does play a role in several regional projects, such as the India-Myanmar-Thailand Trilateral Highway Project and the Bangladesh-China-India-Myanmar (BCIM) Economic Corridor. It has also engaged with the United States and Japan on the “Trilateral Infrastructure Working Group.” However, even in these initiatives, India’s role is quite limited, and largely focused only on areas where it has a comparative advantage such as port development. Indeed, India is the implementer for the Sittwe port project in Myanmar under the BCIM Economic Corridor, and has a stated area of focus on port development within the Trilateral Infrastructure Working Group

In recent years, India has tried to expand its plans to be a more active partner for infrastructure development projects in the Indo-Pacific but has faced some obstacles. In May 2017, India launched a vision document for the “Asia-Africa Growth Corridor (AAGC),” based on Indo-Japanese collaboration to develop “quality infrastructure… complemented by digital and regulatory connectivity.” However, progress has been slow. The AAGC hasn’t taken on any projects yet, and many details regarding the initiative remain opaque.

At times, India has also been overlooked as a partner for infrastructure development in the region. Indeed, when U.S. Secretary of State Mike Pompeo announced $113 million for regional investments at the Indo-Pacific Business Forum, the United States, Japan, and Australia announced a “trilateral partnership to invest in infrastructure projects in the Indo-Pacific region that build infrastructure, address key development challenges, increase connectivity, and promote economic growth” at the same event. India’s absence was conspicuous.

The Way Forward

Given the significant level of infrastructure investment needed in India, and India’s limited role as a funder and implementer outside of its immediate neighborhood, it is clear that, for now, India’s role should be primarily that of a recipient. In doing so, India can not only address its infrastructure needs, but set an example of the kind of open, transparent, and sustainable projects it would like to see implemented across the region.

India’s role over time, however, need not be limited to serving as a recipient. Indeed, India has clearly shown an interest in expanding its role to a partner and supporter of infrastructure development in the broader Indo-Pacific region, and such a growing role should be supported. India’s role as an implementer in projects where it has a comparative advantage outlines a replicable roadmap for others who can elevate their work with India from building projects in India to partnering with it across the region.

To bring India on as a partner, countries should support India’s ambition to play a greater role. Other countries should encourage India’s positive role in Afghanistan, in particular, and engage India’s strength in port development and dam construction in other projects throughout the region. India can also replicate this playbook as it looks to make progress on the AAGC. The initiative’s focus on digital connectivity highlights an area where India can bring a level of relative expertise and provide a roadmap to other developing economies that seek to attain similar levels of competency.

India is already looking to expand its engagement in the Indo-Pacific along these lines. Indian Foreign Secretary Vijay Gokhale said that as India, Japan, and the United States continue to coordinate on connectivity efforts in region, New Delhi sees prospects for deeper cooperation. The United States should follow Japan’s model and explore opportunities to engage India as a recipient in the near term while understanding and deploying India’s sectoral expertise as it implements projects in other countries in the region over time.

Japan, Australia, and the United States have made infrastructure development a centerpiece of their economic strategies to engage countries in the Indo-Pacific. India, given its huge infrastructure needs, as well as its ambition to play a bigger role in the region, needs to find a way to balance both interests. It should, therefore, look to serve as a recipient, hosting projects in India to bridge its $526 billion investment gap in infrastructure, while leveraging areas of key competencies to partner with other countries on projects across the region.